For an Asian capital, Vientiane in the Lao People's Democratic Republic is a sleepy place.

The pace of life in the former French colony is slow, and time often feels as if it is standing still. The closest thing to rush hour is the morning market with every other stall selling baguette sandwiches.

Just minutes away from the capital, there is even a greater sense of serenity.

Like Cambodia, Laos is known for its tragic past. During the Vietnam War it became the most bombed country in history - and that has left a legacy of poverty and underdevelopment.

Four out of five people in this mountainous, landlocked country are subsistence farmers living hand to mouth.

According to the United Nations Development Programme, Laos is currently ranked 133rd out of 177 countries on the Human Development Index.

Natural benefits

But Laos is blessed with a long stretch of the Mekong river, and the river's tributaries and the country's mountainous landscape offer huge potential for generating hydro-electric power.

The Lao government now dreams of becoming the "battery of South-East Asia", utilising the country's powerful natural resource to boost its development.

What Laos needs is a development strategy to reduce poverty without destroying the rivers and resources upon which Lao people depend

Shannon Lawrence, International Rivers

And with its neighbours such as China, Vietnam, and Thailand all craving energy supplies to fuel their surging economies, finding a buyer for the power is not a big worry.

Already under construction, the Nam Theun 2 dam is one of the biggest and most controversial projects in the region.

Located in the central Lao provinces of Khammuane and Bolikhamzy, the $1.45bn (£705m) project is being built by a consortium of companies including Electricite de France (EDF) and the Electricity Generating Company of Thailand.

The World Bank and the Asian Development Bank are among the international agencies providing the funding and support to the project.

When the project is completed at the end of 2009, neighbour Thailand plans to import more than 90% of the power, earning the Lao government about $1.9bn over the next 25 years.

'Lot of thought'

The World Bank sees this as a model project, and it says that every step has been taken to minimise the environmental and social impact.

Peter Stephens, spokesperson at the World Bank, says Nam Theun 2 is a great opportunity for Laos to make a lot of money over a long period of time and use it to help alleviate poverty.

The dam in Laos will change the lives as well as the landscape

"It's a project that has seen a lot of thought put into its side-effects on the environment and the local communities," he explains.

Mr Sor and his family are amongst the 6,200 indigenous peoples who have been forced to move home in order to make way for the dam's reservoir which stretches 450-square kilometres (281 square miles).

Their house in Sopia Village is brand new, and the village now has access to better roads and cleaner water.

"We are settling down nicely now. When the new land is ready, I will grow fruit or vegetables," says Mr Sor.

Powerful problems?

But some critics argue that these villagers are among the luckier ones. They say that many more families are not getting the compensation they deserve, and that question marks remain over their long-term livelihoods.

Non-profit organisations including International Rivers say other hydro-electric power projects in Laos have left a legacy of destroyed livelihoods, and seriously damaged the local environment.

"What Laos needs is a development strategy to reduce poverty without destroying the rivers and resources upon which Lao people depend," says Shannon Lawrence of International Rivers.

"That is the type of initiative the World Bank should be supporting," she added.

For Laos, hydro-electric power is a highly lucrative venture, and it is already constructing another 10 dams and considering building up to 70 more.

The government promises to use the money to alleviate poverty.

But with the country consistently rated as one of the world's most corrupt, there are serious questions as to whether hydro-electric power projects will truly benefit the locals, or simply help make their government richer.